Offshore Jurisdiction Review: Vanuatu

Chances are you’ve never heard of Vanuatu, a small, off-the-grid island in the South Pacific Ocean.

It’s certainly not one of the better known offshore jurisdictions or places people typically think of for international diversification.

Due to its history and its perceived poor international reputation when it comes to complying with global regulations, I’d advise people to be extremely cautious about considering any option with Vanuatu. More detail is in the article below.

That said, and after very careful consideration, Vanuatu might have something to offer in terms of offshore company formation, offshore banking, or lifestyle choices for the right people. I’d completely avoid its relatively new citizenship program, as it has nowhere near the credibility of other, more viable options.

In any case, it’s always good to keep abreast of the options that are available.

Be sure to get the free IM Communiqué, so you can keep up with the best international diversification opportunities.

Last, some of the information in the article below is based on the author’s personal experiences and has not been independently verified. As always, do your own due diligence.

Offshore Jurisdiction Review: Vanuatu

British navigator James Cook chartered the islands that would later become Vanuatu in 1774, naming the islands New Hebrides.

France and Britain long argued over ownership of Vanuatu. Following an 1887 convention, both countries’ navies were responsible for the protection of its own citizens present in New Hebrides.

A movement for independence began in the 1940s. The British supported Vanuatu’s demand for independence, but France was initially reluctant, fearing it might spread to New Caledonia.

New Hebrides ultimately became independent on the July 30, 1980, changing its name to the Republic of Vanuatu.

Independence came with a set of difficulties, in particular land ownership. A series of land reforms were enacted during 1980 until 1986. In the end, foreigners or non-indigenous citizens were not allowed to own land, and many foreign land owners felt cheated after losing their land to natives.

Vanuatu Offshore Company

The Vanuatu International Companies Act is very similar to other international business company (IBC) laws around the world. It was written in 1992 and came into force the same year.

There are a number of features which make Vanuatu an attractive place to form an offshore company.

Vanuatu has zero corporate tax, both for international and domestic/resident companies. Companies are also exempt from capital and exchange controls.

Accounts must be kept but don’t need to be filed, and there are no auditing requirements.

Vanuatu does not have as big of an international profile as other popular offshore company jurisdictions, like the British Virgin Islands, Belize, and the Seychelles.

Vanuatu companies are an interesting option for those seeking a high level of privacy and ease of use. On the flip side, because of the lack of transparency, Vanuatu’s international reputation isn’t always the best.

The fees involved in forming and maintaining a Vanuatu company are low, but due to limited competition, the actual cost from registered agents can be high, often exceeding $1,000 for incorporation.

Offshore Banking in Vanuatu

Banking in Vanuatu is relatively good, but the country has had a long history of banks disappearing and licenses being revoked.

In 2002, the government enacted The International Banking Act. The purpose of this new law was to clean up so-called shoebox banks that had plagued the jurisdiction for a long time.

It is still quite easy to form a bank in Vanuatu, with capital requirements of only $500,000, which can be held in a bank account outside of Vanuatu.

The quality of the banks varies enormously. The most common banks used with offshore companies are probably Bred Bank and Pacific Private.

Living in Vanuatu

Vanuatu is a remote, tax-free tropical paradise.

Hostile feelings against Westerners are almost entirely gone. There are virtually zero ethnic tensions.

In addition to zero corporate tax, it also has no income tax, no capital gains tax, no estate tax, no wealth tax, and no other personal income taxes.

Sales tax, however, stands at 12.5%.

Costs of living are relatively low, but as with any other small island nation, Vanuatu relies on imports, which drives up prices a lot on items that cannot be produced locally.

Immigration can be arduous and difficult.

Directors of Vanuatu offshore companies, where the company has been operating for at least five years, can apply for residency in exchange for a deposit of 300,000 Vanuatu vatu (VUV), or around $3,200 USD.

Citizenship is available after 10 years of residency or under the Capital Investment Immigration Plan (CIIP), whereby a limited citizenship is issued in exchange for a deposit of around $300,000.

Final Words

For those interested in Vanuatu, tread especially carefully. The government can be fickle, as history has shown.

It’s unlikely that Vanuatu will make any changes, let alone drastic changes, to its incorporation or banking acts.

Streber works as a consultant and director for a wide range of companies and has broad experience in offshore banking, offshore incorporation (formation and maintenance of offshore companies), taxation, privacy, ecommerce, merchant accounts, online payments, and all other things the privacy-minded entrepreneur might find interesting. You can read Streber’s blog on offshore incorporation and offshore banking.